Why New York VC Charlie O'Donnell Will Use His New $15.1 Million Fund To Back First-Time Founders

Venture capitalists love to invest in startups led by founders who've done it before. They're battle tested, the logic goes, and are too well-informed to be doing it again for the wrong reasons.

Charlie O'Donnell enjoys doing the opposite. "I'd rather back people in their 30s who have learned something versus people in their 20s who have built something," the investor says. Direct experience in a sector, even at a big company, can make more of a difference, he believes. So with his first independent fund as a one-man band at Brooklyn Bridge Ventures, O'Donnell invested in 35 companies, about ninety percent of which were led by founders taking venture dollars for the first time.

With his second fund announced on Monday, O'Donnell expects that ratio to stay roughly the same. Learning the ropes from the other side of the table working for a limited partner that invested in venture firms, O'Donnell worked on a study that found that the top performing firms tended to be the ones that stuck to the same strategy. "I'm honed in on trying to be consistent now," he says.

Brooklyn Bridge Ventures operates in a somewhat nebulous stage of investing called "pre-seed." That means O'Donnell only invests in companies when they're still early in their development and haven't raised $750,000 or more in a previous investment round. At that point the companies are usually worth a couple million dollars and could have little more than a vision and a Powerpoint presentation or a prototype.

With his first $8.3 million fund, O'Donnell backed just under 10 companies per year for check sizes of between $200,000 and $250,000. Typically he'd be one of a group of investors collaborating on a deal. Now, with a bit more brand recognition and investments in startups including Canary, goTenna, Hungryroot, Orchard, Ringly and even a popular ice cream chain, Ample Hills Creamery, O'Donnell is aiming to write bigger checks for $350,000 and lead more deals himself.

At least in the New York tech community, O'Donnell says that collaboration is still strong at the earliest stage. "If you are seen as a well-intentioned and helpful investor, most VCs will share opportunities with you," he says. One thing they're not doing enough: proactively leading deals, he argues. Both goTenna and Ample Hills raised rounds in which Brooklyn Bridge wrote checks for just a small percentage of the overall investment. But O'Donnell had to help scrounge up the other investors, even creating a mailing list to help investors share deal flow.

O'Donnell believes that the investing ranks at the earliest stages, at least outside Silicon Valley, are largely turning over as funds and their partners taste first-hand the leaner management fees that can be drawn from a few million to invest versus tens of millions, while others burn out or catch the startup bug themselves. "A lot have gotten larger or packed up and gone home," he says.

The New York tech community was jolted in 2009 when Foursquare took off and VCs opened up offices in the city to spot the next big hit, Brooklyn Bridge's founder says. Of the best-known early-stage firms to stake out New York, the leaders are still pretty much the same, including two firms he worked stints at: First Round Capital and Union Square Ventures. To carve out his own role, O'Donnell launched his own weekly newsletter tracking tech events and hosts dinners with fellow techies around the scene. "There's enough people to get a deal done and not too many where we trip over each other," he says.

Another quirk of venture capital: investors now raise funds every three to four years, but companies take more than twice that to typically exit. That means investors like O'Donnell go out to raise without cash returns to show yet or real proof. So LPs judge investors in part by reading the tea leaves on how a portfolio will look like years later. For Brooklyn Bridge, that was more than it'd had to show the previous time around: raising a second fund took O'Donnell just one-third the time of the first, and this time large institutions wrote him checks.